Tax Deduction for business permits, concessions, and commercial leases

Business permits, concessions, and commercial leases are defined as follows:

1. Business Permit
   A business permit is defined as a permit to carry on or operate a business that is issued by  a public authority in accordance with any applicable law and it shall be deemed to have been acquitted by a person if and when such person is registered as the holder thereof with the relevant public authority.
2. Concession
   A concession is defined as the privilege to carry on a business activity granted by a public authority that has exclusive rights over such activity.
3. Commercial Lease
   A commercial lease means the lease of a commercial going concern (twellija) or the lease of immovable property for the purpose of carrying on a trade, business, profession, or vocation therein. It also includes any sub-lease of a commercial lease.

Definition of Public Authority

The term “public authority” refers to a government ministry, department, or agency, or any other entity in which the government holds, directly or indirectly, a controlling interest.

 Other key conditions

 The key conditions to be eligible for such deduction include the following:

• A deduction shall be allowable only if the acquisition in question, including the payment of the consideration results by means of a document in writing.
• No deduction shall be allowed in respect of the acquisition of a permit, concession, or lease for an indefinite duration or for a duration of more than 15 years.
• The deduction shall be  spread evenly over 15 years or actual term, whichever is shorter.
• Where the duration of the business permit, concession or commercial lease may be extended or renewed at the option of the person acquiring them or without the requirement for a payment of a capital nature by way of a further consideration, the periods for which they may be extended or renewed shall be deemed as part of their duration, provided that the aforementioned terms are still respected.
• No further deductions may be claimed if the taxpayer transfers, sublets, cedes, assigns such lease or no longer uses or employs such permit, concession or lease.
• If a person who has claimed this deduction, later transfers the permit, concession, or lease, the deduction allowed for the acquisition cost when calculating tax on the transfer or related gains must be reduced by the amount previously claimed under this paragraph. However, this reduction cannot exceed the original acquisition cost deduction.
• No deduction shall be allowed if the permit, concession, or lease is acquired from a related party.
• Capital expenditure incurred to extend, renew, or modify the terms of a business permit, concession, or commercial lease shall be treated as allowable in the same way as if the extension, renewal, or modification were a new acquisition.

Forvis Mazars’ views

This new deduction offers a significant tax advantage for businesses acquiring permits, concessions, and commercial leases, making expansion and operational flexibility more financially sustainable. It also provides a degree of clarity in the tax implications associated with the transfer of such assets.  More importantly, it reflects a notable evolution in Malta’s tax policy—extending deductions beyond traditional fixed assets to encompass intangible ones.